New Goldvue Mines Limited Limited Mines New Metalore Mining Company Limited Saskalon Uranium and Oils Limited Sheraton Uranium Mines Limited New Surpass Petrochemicals Limited Shoreland Mines Limited New Vinray Mines Limited New West Amulet Limited Norcopper and Metals Corporation Norseman Nickel Corporation Limited North Gaspe Mines Limited North Tech Explorations Limited Nu-World Uranium Mines Limited Ordala Mines Limited Palliser Petroleums Limited Pantan Mines Limited Sico Mining Corporation Limited St. Pierre & Miquelon Explorations Inc. Sudbay Exploration and Mining Surety Oils and Minerals Limited Tamara Mining Limited Tamicon Iron Mines Limited Temanda Mines Limited Territory Mining Company Limited Torbrook Iron Ore Mines Limited Paramount Petroleum and Minerals Trans Nation Minerals Limited Corporation Limited Peace River Petroleums Limited Quebank Uranium Copper Corporation Smelters Quebec Graphic Corporation Regal Mining & Development Limited Riobec Mines Limited Roberval Mining Corporation Trenton Mines Limited Tri-Cor Mining Company Limited Val Jon Exploration Limited Viscount Oil and Gas Limited Wakefield Uranium Mines Limited Westville Mines Limited Whitney Uranium Mines Limited SECTION OF SECURITIES VIOLATIONS A Section of Securities Violations is maintained by the Commission as a part of its enforcement program to provide a further means of detecting and preventing fraud in securities transactions. The Section maintains files providing a clearing house for other enforcement agencies of information concerning persons who have been charged with violations of various Federal and State securities statutes. Considerable information is also available concerning violators resident in the provinces of Canada. The specialized information in these files is kept current through the cooperation of the United States Post Office Department, the Federal Bureau of Investigation, parole and probation officials, State securities authorities, Federal and State prosecuting attorneys, police officers, better business bureaus, chambers of commerce and other agencies. At the end of the fiscal year these records contained information concerning 69,013 persons against whom Federal or State action had been taken in connection with securities violations. In keeping these records current, there were added during the fiscal year items of information concerning 9,576 persons, including 3,450 persons not previously identified in these records. The Section issues and distributes quarterly a Securities Violations Bulletin containing information received during the period concerning violators and showing new charges and developments in pending cases. The bulletin includes a "Wanted" section listing the names and references to bulletins containing descriptive information of persons wanted on securities violations charges. The bulletin is distributed to cooperating law enforcement and other agencies in the United States and Canada. Extensive use is made of the information available in these records by regulatory and law enforcing officials. Numerous requests are received each year for special reports on individuals in addition to the information supplied by regular distribution of the quarterly bulletin. All available information is supplied in response to inquiries from law enforcement agencies. During the fiscal year the Commission received 3,730 "securities violations" letters or reports and dispatched 944 communications to cooperating agencies. APPLICATIONS FOR NON-DISCLOSURE OF CERTAIN INFORMATION The Commission is authorized under the various acts administered by it to grant requests for nondisclosure of certain types of information which would otherwise be disclosed to the public in applications, reports or other documents filed pursuant to these statutes. Thus, under paragraph (30) of schedule A of the Securities Act of 1933, disclosure of any portion of a material contract is not required if the Commission determines that such disclosure would impair the value of the contract and is not necessary for the protection of the investors. Under section 24 (a) of the Securities Exchange Act of 1934, trade secrets or processes need not be disclosed in any material filed with the Commission, and under section 24 (b) of that act written objection to public disclosure of information contained in any such material may be made to the Commission which is then authorized to make public disclosure of such information only if in its judgment such disclosure is in the public interest. Similar provisions are contained in section 22 of the Public Utility Holding Company Act of 1935 and in section 45 of the Investment Company Act of 1940. These statutory provisions have been implemented by rules specifying the pro cedure to be followed by persons who apply to the Commission for a determination that public disclosure is not necessary in a particular case. The number of applications granted, denied or otherwise acted upon during the year are set forth in the following table: Applications for non-disclosure during 1959 fiscal year ACTIVITIES OF THE COMMISSION IN ACCOUNTING AND AUDITING Successive reports of the Commission have called attention to the fact that the detailed provisions of the several acts administered by the Commission recognize the importance of dependable informative financial statements which disclose the financial status and earnings history of a corporation or other commercial entity. These statements, whether filed in compliance with the statutes administered by the Commission or included in other material available to stockholders or prospective investors, are indispensable to investors as a basis for investment decisions. The Congress recognized the importance of these statements and that they lend themselves readily to misleading inferences or even deception, whether or not intended. It accordingly dealt extensively in the several statutes administered by the Commission with financial statement presentation and the disclosure requirements necessary to set forth fairly the financial condition of the company. Thus, for example, the Securities Act requires the inclusion in the prospectus of balance sheets and profit and loss statements "in such form as the Commission shall prescribe" and authorizes the Commission to prescribe the "items or details to be shown in the balance sheet and earnings statement, and the methods to be followed in the preparation of Similar authority is contained in the Securities Exchange Act, and more comprehensive power is embodied in the Investment Company Act" and the Holding Company Act.12 accounts 10 12 14 The Securities Act provides that the financial statements required to be made available to the public through filing with the Commission shall be certified by "an independent public or certified accountant." 13 The other three statutes permit the Commission to require that such statements be accompanied by a certificate of an independent public accountant, and the Commission's rules require, with minor exceptions, that they be so certified. The value of certification by qualified accountants has been conceded for many years, but the requirement as to independence, long recognized and adhered to by some individual accountants, was for the first time authoritatively and explicitly introduced into law in 1933. Out of this initial provision in the Securities Act and the rules promulgated by the Commission,15 and the action taken by the Commission in certain cases,16 have grown concepts of accountant-client relationships that have strengthened the protection given to investors. As shown above, the statutes administered by the Commission give it broad rule-making power with respect to the preparation and presentation of financial statements. Pursuant to authority contained in the statutes the Commission has prescribed uniform systems of accounts for companies subject to the Holding Company Act; 17 has adopted rules under the Securities Exchange Act governing accounting and auditing of securities brokers and dealers; 18 and has promulgated rules contained in a single, comprehensive regulation, identified as Regulation S-X,19 which govern the form and content of financial statements filed in compliance with the several acts. This regulation is implemented by the Commission's Accounting Series Releases, of which 82 have so far been issued. These releases were inaugurated in 1937, and were designed as a program for making public, from time to time, opinions on accounting principles for the purpose of contributing to the development of uniform standards and practice in major accounting questions. The rules and regulations thus established, except for the uniform systems of accounts, prescribe accounting to be followed only in certain basic respects. In the large area not covered by such rules, the Commission's principal reliance for the protection of investors is on the determination and application of accounting principles and auditing standards which are recognized as sound and which have attained general acceptance. 13 Sections 7 and 10(a), Schedule A, paragraphs 25 and 26. 14 Securities Exchange Act, section 13 (a) (2); Investment Company Act, section 30(e); Holding Company Act, section 14. 15 See, for example, rule 2-01 of regulation S-X. 16 See, for example, Securities Exchange Act Release No. 3073 (1941); 10 S.E.C. 982 (1942); and Accounting Series Release No. 68 (1949). 17 Uniform System of Accounts for Mutual Service Companies and Subsidiary Service Companies (effective Aug. 1, 1936); Uniform System of Accounts for Public Utility Holding Companies (effective Jan. 1, 1937; amended effective Jan. 1, 1943). 18 Rule 17a-5 and Form X-17A-5 thereunder. 19 Adopted Feb. 21, 1940 (Accounting Series Release No. 12); revised Dec. 20, 1950 (Accounting Series Release No. 70). Since changes and new developments in financial and economic conditions affect the operations and financial status of the several thousand commercial and industrial companies required to file statements with the Commission, accounting and auditing procedures cannot remain static and continue to serve well a dynamic economy. It is necessary for the Commission to be informed of the changes and new developments in these fields and to make certain that the effects thereof are properly reported to investors. The Commission's accounting staff, therefore, engages in studies of the changes and new developments for the purpose of establishing and maintaining appropriate accounting and auditing policies, procedures and practices for the protection of investors. The primary responsibility for this program rests with the Chief Accountant of the Commission who has general supervision with respect to accounting and auditing policies and their application. Progress in these activities requires constant contact and cooperation between the staff and accountants both individually and through such representative groups as, among others, the American Accounting Association, the American Institute of Certified Public Accountants, the American Petroleum Institute, the Controllers Institute of America, the National Association of Railroad and Utilities Commissioners, the National Federation of Financial Analysts Societies, as well as other government agencies. Recognizing the importance of cooperation in the formulation of accounting principles and practices, adequate disclosure and auditing procedures which will best serve the interests of investors, the American Institute of Certified Public Accountants, the Controllers Institute of America, and the National Federation of Financial Analysts Societies regularly appoint committees which maintain liaison with the Commission's staff. The many daily decisions of the Commission require the almost constant attention of some of the chief accountant's staff. These include questions raised by each of the operating divisions of the Commission, the regional offices and the Commission. This day-to-day activity of the Commission and the need to keep abreast of current accounting problems cause the chief accountant's staff to spend much time in the examination and re-examination of sound and generally accepted accounting and auditing principles and practices. From time to time members of this staff are called upon to assist in field investigations, to participate in hearings and to review opinions, insofar as they pertain to accounting matters. Prefiling and other conferences, in person or by telephone, with officials of corporations, practicing accountants and others, occupy a considerable amount of the available time of the staff. This procedure, which has proven to be one of the most important functions |